Nikkei extends gains, gets lift from Wall Street rally

Japan's Nikkei share average retook the 19,000 level on Tuesday for the first time in three weeks, buoyed by Wall Street gains as well as relief that North Korea did not conduct another missile test to mark a military anniversary.

The Nikkei was up 0.8 percent at midday at 19,034.74, getting a tailwind from a modestly weaker yen.

Japan’s Nikkei share average retook the 19,000 level on Tuesday for the first time in three weeks, buoyed by Wall Street gains as well as relief that North Korea did not conduct another missile test to mark a military anniversary. Investors had speculated that Pyongyang could launch another long-range missile launch to coincide with the 85th anniversary of the foundation of the North’s Korean People’s Army on Tuesday. Such launches have typically come in the morning.

“When the morning passed with nothing from North Korea, the sense of relief grew, and so the market extended its early gains,” said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. “Stocks were already higher after U.S. shares rallied on relief after the French election,” he added.

Major indexes on Wall Street all gained more than one percent on Monday, a day after centrist candidate and market favourite Emmanuel Macron won the first round of the French presidential election. The Nikkei was up 0.8 percent at midday at 19,034.74, getting a tailwind from a modestly weaker yen.The dollar added 0.3 percent on the day to 110.08 yen.

But the Japanese currency could face upward pressure depending on developments in North Korea, as the perceived safe-haven currency tends to gain in times of geopolitical tensions. A nuclear-powered U.S. submarine made a port call in South Korea on Tuesday in a show of force, as the top nuclear envoys from South Korea, Japan, and the United States were to meet in Tokyo to discuss responses to the North’s refusal to give up its nuclear programme.

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On the domestic front, the Bank of Japan will begin a two-day policy meeting on Wednesday, at which it is set to offer a more upbeat assessment of the economy than it did last month as a pick-up in overseas demand bolsters exports and factory output, sources have told Reuters.